To make a Flash animation transparent in Internet Explorer use so called "windowless" mode. Add the following parameter s to the OBJECT and EMBED tags in the HTML code:
<param name="wmode" value="transparent">
<embed wmode="transparent">
Correct Flash code with Transparent option:
<OBJECT CLASSID="clsid:D27CDB6E-AE6D-11cf-96B8-444553540000"
WIDTH="486" HEIGHT="60"
CODEBASE="http://active.macromedia.com/flash5/cabs/swflash.cab#version=5,0,0,0">
<PARAM NAME="MOVIE" VALUE="test.swf">
<PARAM NAME="PLAY" VALUE="true">
<PARAM NAME="LOOP" VALUE="true">
<PARAM NAME="WMODE" VALUE="transparent">
<PARAM NAME="QUALITY" VALUE="high">
<EMBED SRC="test.swf" WIDTH="486" HEIGHT="60" PLAY="true" LOOP="true" WMODE="transparent" QUALITY="high"
PLUGINSPAGE="http://www.macromedia.com/shockwave/download/index.cgi?P1_Prod_Version=ShockwaveFlash">
</EMBED>
</OBJECT>